HMRC have published their Employer Bulletin for October 2019. We summarise the key content for you, with links to our detailed guidance on the topics covered.
Some of the items included in this update were also included in the Agent update: Brexit Special September 2019, and Agent update August/September 2019, rather than duplicate these we have linked to those updates accordingly where appropriate.
Changes for UK employers sending workers to the EU, the EEA or Switzerland
EU, EEA or Swiss citizens working in the UK
- Employees will not need to pay UK NIC if they are employed mainly in one or more EU, EEA countries or Switzerland but carry out limited work in the UK and meet certain conditions which will be published after Brexit.
- This applies whether or not they have a valid A1/E101 form.
PAYE Settlement Agreements and Welsh rate of Income Tax
For PAYE Settlement Agreements in relation to the tax year beginning 6 April 2019, you must ensure you consider the following when completing your return:
- Employees who pay English or Northern Ireland Income Tax
- Employees who pay Scottish Income Tax
- Employees who pay the Welsh rate of Income Tax.
Making your PAYE Settlement Agreement payment
Some PAYE Settlement Agreement (PSA) customers may not have received a payslip confirming the amount owed under their PSA arrangement for the 2018 to 2019 tax year.
- You should still pay tax and NIC that you have worked out is due under your PSA by 22 October 2019 (19 October 2019 if paying by post), even if you have not received confirmation of your calculation or a payslip.
- When making your payment quote your unique PSA customer account reference number, which is shown on your PSA confirmation letter, not your PAYE Accounts Office reference.
- You may be fined or charged interest or a late payment penalty if you do not pay or your payment is late.
Reporting payroll information accurately and on time
HMRC understands that the article in the August 2019 Employer Bulletin needs clarification around the RTI Full Payment Submission (FPS) field payment date.
- The FPS must be submitted on or before the date that your employee is paid, unless the normal payment date falls on a non-banking day (Saturday, Sunday or bank holiday).
- When a regular payday falls on a non-banking day payment is made on the:
- last working day before the regular payday or
- next working day after the regular payday.
- For PAYE the payment may be treated as having been made on the regular payday. This is the date that should be reported on the FPS as the ‘payment date’.
- For NIC the payment must be treated as if it had been made at its regular time.
Guidance for employers on reporting PAYE information in real-time when payments are made early at Christmas
- In December 2018, HMRC wrote to employers to advise a temporary easement on reporting PAYE information in real-time, as some employers pay their employees earlier than usual over the Christmas period.
- Following feedback this easement is now being made permanent.
- If you do pay early over the Christmas period, report your normal (or contractual) payday as the payment date on your FPS and ensure that the FPS is submitted on or before this date.
VAT reverse charge on construction services: introduction delayed by 12 months
Following concerns that some businesses require more time to implement the VAT domestic reverse charge for building and construction which was due to be introduced on 1 October 2019, and as that date was close to the date the UK is due to exit the EU, the introduction of the reverse charge is delayed until 1 October 2020.
- The government announced an independent review of the loan charge on 11 September 2019.The review will report back to government by mid November 2019. HMRC will update the guidance with next steps once the government has responded to the review.
- [Editorial note: the review is in progress and evidence is being taken. It seems unlikely that the loan charge will be amended as so many have settled, however the outcome could be that HMRC is advised to be more flexible and sensitive to the predicaments of individuals who are adversely affected and in distress].
Reporting disguised remuneration loans in error
- HMRC have advised that they have received a number of Full Payment Submissions (FPS) from employers who are incorrectly reporting Disguised Remuneration payments.
- Disguised remuneration loans should only be reported where:
- employee remuneration has been provided in the form of loans to avoid paying Income Tax and NICs, and
- these loans are outstanding and are therefore subject to the ‘loan charge’.
- HMRC advise some employers appear to be reporting amounts in error, for instance, to report an employee loan or advance. These amounts should not be reported as ‘Disguised Remuneration’.
- If you have inadvertently reported disguised remuneration figures you do not need to take any action as this does not affect the employer payment position.
Non-reporting of the loan charge
- If you are subject to the loan charge for an employment based scheme, and are not in the process of settling with HMRC, you should have reported and paid what you owe under PAYE by 22 April 2019.
- HMRC will be writing to employers who have not met their loan charge reporting responsibilities.
Termination payments: Post Employment Notice Pay for employees paid by equal monthly instalments
Where an employee is paid by 12 equal monthly instalments, but their notice period is expressed in days or weeks, the formula for calculating Post-Employment Notice Pay (PENP) for Termination Awards gives different results depending when in the year notice is given. In these circumstances an alternative calculation may be used.
The current PAYE special arrangement under Regulation 141 for Short Term Business Visitors is changing
From 6 April 2020, the current PAYE special arrangement for employers with short term business visitors (STBVs) from overseas branches or territories with which the UK does not have a Double Taxation Agreement will be known as ‘STBV Appendix 8’ and is changing.
What this means:
- an increase in the UK workday limit from 30 to 60 days from 6 April 2020 onwards. The UK workday limit for 2019/20 will remain as 30 workdays.
- The filing and payment deadlines will change to 31 May 2021 (for 2020/21 annual return) onwards. The filing and payment deadlines for 2019/20 annual returns remain as 19 April 2020 and 22 April 2020 respectively.
- The way you file returns and make payments won’t change but if you are using the current PAYE special arrangement, you will need to sign-up to the new Appendix 8.
Do your employees have the right tax code?
There are different tax codes for employees living in Scotland or Wales.
- For employees living in Scotland their code should include an ‘S’ prefix (e.g. S1250L).
- For employees living in Wales their code should include a ‘C’ prefix (e.g. C1250L). You should have received a P9 (or P6) notification advising you of tax code changes for employees living in Wales for 2019/20.
- If you have received a coding notification, you must update your employee payroll record with the new code before you next pay your employee. You may need a payroll software update.
Employment Allowance reform – eligibility rules for the Employment Allowance are changing from April 2020
From 6 April 2020 the Employment Allowance (EA) will be restricted to employers with secondary (employers) National Insurance contributions liabilities of under £100,000 in the previous tax year.
- If you have multiple PAYE schemes or are part of a group of companies, the NICs liabilities of all companies and PAYE schemes, must be added together to assess eligibility for the EA.
Do you claim the Apprenticeship Levy Allowance or Employment Allowance?
HMRC have advised employers are submitting claims to either the Apprenticeship Levy and/or the Employment Allowance that may be incorrect because the eligibility criteria have not been met.
- The Apprenticeship Levy and Employment Allowance eligibility rules restrict the allowances where there are “connected party” employers. Larger groups of companies need a clear and robust policy on which PAYE scheme will claim so that they claim only the allowance(s) they are entitled to.
- If you have claimed incorrectly you should correct any errors as soon as possible and repay sums claimed in error.
Changes to company car tax regime
The Government is adjusting the car and car fuel benefit calculation for Ultra-Low Emission Vehicles (ULEVs).
From 6 April 2020
- There will be 11 new bands for ULEVs including a separate zero emissions band.
- If a car has a CO2 emission figure of 1-50g/km you will need to provide the car’s zero emission mileage.
See Company Cars
Student and Postgraduate Loans
In September, HMRC started to send Generic Notification Service messages to employers who continue to take Student Loan or Postgraduate Loan deductions from their employee after a stop notice has been issued. These are a prompt for employers to stop making deductions from the next available pay day and are delivered to employers’ PAYE online accounts.
The government has confirmed that from 6 April 2020 the threshold will remain at £21,000 for Postgraduate loans. Earnings above £21,000 will be calculated at 6%.
Your automatic enrolment duties as a new employer
- Every UK employer must put certain staff into a workplace pension scheme and pay into it. This is ‘automatic enrolment’.
- Even if you think you won’t need to put your staff into a scheme, you still have duties. You should use The Pensions Regulator’s (TPR) online tool to work out what you need to do and how to meet your duties.
- As a new employer, TPR will write to you and issue a letter code needed to help complete your duties.
- If you are not an employer, automatic enrolment does not apply; use the tool to check this.
High Income Child Benefit Charge
HMRC are aware some employees have large stockpiles of vouchers they cannot spend because their circumstances have changed, and expect employers to make sure employees are aware of how much in vouchers they have, and any terms which have been set about vouchers expiring.
Childcare Vouchers and Tax-Free Childcare (TFC) FAQs:
- Can employees still join the voucher scheme?
No, childcare voucher schemes closed to new entrants in October 2018. TFC may apply instead.
- An employee used to receive childcare vouchers; however, they left the scheme in favour of TFC and informed their employer at the time. Can they return to the voucher scheme?
No, if they have notified their employer they wish to stop receiving vouchers, they cannot return to the voucher scheme. They can use up any vouchers they have from before they claimed TFC.
- A business has been taken over by a new company, can an employee of that business still get vouchers/can they start getting vouchers?
If they move employers under a business transfer covered by the Transfer of Undertakings (Protection of Employment) (TUPE), their terms and conditions of employment remain the same. If they were part of a voucher scheme on or before 4 October 2018 and are subject to TUPE, they can join their new employer’s existing childcare voucher scheme if they offer one.
- Can childcare vouchers be refunded?
Refunding unused vouchers is at the discretion of the employer and depends on the contractual arrangements of the scheme. If a refund is made by the employer, they will need to deduct PAYE tax and NICs first.
If the company no longer exists, the voucher provider may refund the employee directly depending on the contract between the company and the voucher provider.
- An employee has taken a break from their voucher scheme, can they start receiving vouchers again?
Yes, if they have not changed jobs since 4 October 2018, not told their employer to stop giving them childcare vouchers because they have joined TFC, and have received a voucher from their employer’s scheme within the last 52 weeks.
- How does an employee know if they will be better off with childcare vouchers or Tax Free Childcare?
There’s a childcare calculator on the Childcare Choices website.
- An employee currently receives childcare vouchers and wants to apply for 30 hours free childcare only. Can they do this without giving up their vouchers?
Yes. They can claim 30 hours free childcare at the same time as Childcare Vouchers.
Trivial Benefits in kind
- Did you know the rules on the exemption from tax and NICs for Trivial Benefits apply to the provision to employees of ‘a benefit’?
- A benefit can be the provision of one item/event, or the provision of a series of items/ events which together constitute a single benefit.
- What might appear to be several individual benefits can actually be a single benefit provided over the tax year. Once the cost of provision exceeds £50 it takes it out of the trivial benefits exemption.
See Example D in the Employment Income Manual at EIM21865:
Employer D gives an employee a gift card which costs £10 to provide. The employer tops up the gift card on 7 occasions, at a cost of £10 each time. Although the benefit is topped up on separate occasions, there is a single benefit of the provision of the gift card. The total cost to the employer of providing the benefit is £80 and the benefit is not exempt as a trivial benefit.
Another example is a season ticket for a football club (where the cost of the ticket averages out at £40 a match). If you give your employee access to the ticket once during a tax year, then that benefit is trivial and is not taxable under the rules but if the same employee has access to the season ticket twice or more during a year, the benefit of the access to the ticket is a single benefit and is not trivial.
Other common areas of error are in relation to the repeated provision of connected staff entertaining, or access to app-based services such as the provision and payment for taxis.
Paying for fitness equipment
There are schemes available to help employers encourage employees to improve their wellness where the employer pays some or all of a finance agreement on various items such as fitness bands or bicycles. Some schemes claim to be non-taxable on the employee and a cost-effective way for employers to promote a healthier lifestyle for their employees.
There are times when these schemes should be classed as earnings and in these instances the employer should deduct Income Tax and Class 1 NICs and pay it over to HMRC in the normal way through PAYE.
- When they require the employee to enter into a third-party finance agreement to obtain an asset and
- When the employer makes payments to cover a proportion or all of the repayments based upon the success of the employee.